Featured Product

    IMF Publishes Reports on 2018 Article IV Consultation with Croatia

    February 13, 2019

    IMF published its staff report and selected issues report under the 2018 Article IV consultation with the Republic of Croatia. Directors commended the Croatian National Bank (CNB) for its conservative prudential policies and encouraged the authorities to consider additional measures to prevent excessive household borrowing, if needed. They welcomed continued efforts toward reducing the stock of non-performing loans (NPLs), encouraged continued improvements in bankruptcy legislation, and advised a comprehensive review to ensure that the insolvency framework aligns fully with the international best practices.

    The staff report highlighted that, overall, the banking system is very liquid, is well-capitalized, and has continued to gradually consolidate. The comfortable average capital adequacy ratio has eased the introduction of IFRS 9 and the gradual increase of risk-weights on foreign-exchange sovereign debt, beginning in 2018. The NPL ratio (90 days overdue) has continued to decline to 10.3% in September 2018, largely due to the NPL sales. Given the still high corporate indebtedness and the level of NPLs, provisioning remains high, although the coverage ratio declined somewhat to 59% due to the NPL sales. Beginning in 2018, the monitoring of loans overdue between 30 and 90 days has intensified and banks are required to develop strategies to lower their NPL ratio. Bank lending to households has been growing, although credit to the non-financial corporate sector has remained subdued. 

    The report further notes that financial intermediation costs of Croatian banks are still relatively high, possibly due to the relatively low level of digitalization, retroactive contract enforcement, or regulatory cushions. Recent research shows that better governance practices are conducive to more predictable contract enforcement and would help reduce costs, risks, and uncertainty of doing business, thus ultimately lowering the financial intermediation costs. The also report highlights that strong supervisory and macro-prudential policies of CNB have contained the potential pressure points. Effective from 2018, the appraisals of household housing loans were tightened, giving more emphasis to income indicators. The real estate market is also picking up, albeit from a low base and the recovery is rather segmented. Should both household borrowings and real estate prices further accelerate, additional macro-prudential measures may need to be considered, including a comprehensive debt-service-to-income ratio capturing all debts, not just debts related to housing loans. 

    The selected issues report explores how inter-sectoral vulnerabilities and risks have shifted over 2001–17 and especially after the global financial crisis. The report analyzes financial positions at the sectoral-level deposit-taking institutions and non-financial corporations, households, the public sector, and CNB by disaggregating them into instruments, currencies, and maturities. A section of the report employs balance-sheet analysis to gauge cross-sectional exposures and risks. Finally, the report discusses policies to reduce the remaining inter-sectoral vulnerabilities.

     

    Related Links

    Keywords: Europe, Croatia, Banking, Article IV, NPLs, Macro-Prudential Policy, CNB, IMF

    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    EBA Updates Lists of Entities for Use in Capital Calculations under SA

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6826